The field (dating to Jurassic deposits) was discovered 45 years ago back in 1968 by an accident, the field is currently being developed by a number of companies, including a partnership between Rosneft and ExxonMobil, and Salym Petroleum - a JV between Shell and Gazprom Neft.

At the upper end of this estimate, Bazhnov field pushes to 4 times Saudi Arabia's oil reserves or roughly 30 years of world supply at current demand levels. This is why IEA considers Bazhenov field as the world's largest source of shale. Of course, Russia is already producing more oil than Saudi Arabia with daily production of 10.3 million barrels per day and Russian most productive fields - those of West Siberia, like Salym group, are declining, with production dropping at an average of 2% annually.

But back to the Russia-China gas deal... there is huge legacy infrastructure network linking Europe with Western Siberian basin, and virtually no networks linking it to the Asia-Pacific. With the gas agreement signed this week, this is about to start changing. Which means that the gas deal will promise to wire shale oil and gas reserves of the entire Siberia into the massive AP markets, providing two key deliverables for Russia:

Diversification of demand, linking more closely pricing in the Western European markets (stagnant of economic growth and demographic expansion) to that of dynamic AP. Russia wins in this scenario big time, as it will no longer be held hostage to the declining macroeconomic fortunes of the EU.

Head-on competition with North America (where LNG and oil shipments will have to go via sea transport as opposed to pipe in Russian case).

Europe also wins, as the second point above will help contain energy price inflation in the EU as North Sea production declines in decades ahead.

The point that is being missed on the Russia-China deal by many analysts is that, politics aside, Russia will benefit from a massive shifting of economic activity East - to the regions rich in resources and starving of infrastructure to develop them. With this shift, Russian social development also will gain - the sparsely populated expanses of Eastern Siberia can do with the population growth that can happen on foot of large and sustained capex uplift.

Disclaimer

This blog represents my personal views and is not reflective of the views or opinions held by any company, contractor, client or employer I work for currently or have worked for in the past. These views are not an endorsement to take any action in the markets or of any political position, figures or parties.

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